State to pay vendor $35 million more for faulty health website

Friday

Jun 20, 2014 at 6:02 PM

By Matt MurphyState House News Service

BOSTON -- The Patrick administration signed a deal on Friday with web vendor CGI, agreeing to pay an additional $35 million for services and components built by the contractor for the failed health insurance enrollment website as part of an agreement to formally sever ties with the company.

The agreement will bring the total paid by the state from federal grants for the dysfunctional website to $52 million, just more than half of the original $89 million contract with the Canada-based IT vendor.

Despite announcing in March that the state planned to end its relationship with CGI, the company has continued to work on a daily basis with the state’s new vendor Optum to put the web project back on track, and will continue to provide assistance for a couple months to complete the “knowledge transfer” to the new contractor, according to officials.

“We are using system components that they built for us every single day,” said Maydad Cohen, the governor’s former deputy chief of staff who has been put in charge of overseeing the health insurance website rebuild.

The terms of the agreement were finalized Thursday night and signed by both parties Friday. Cohen and Administration and Finance Secretary Glen Shor briefed the media on the details in a conference call.

Under the terms of the agreement, CGI has waived certain non-compete agreements so that Optum can hire CGI staff onto the project, and the attorney general retains the right to try to recoup up to $12 million from CGI depending on the results of its ongoing investigation under the False Claims Act.

State health officials face an early July deadline to prove that their new plan to develop a functional online health insurance enrollment portal can be operational by the fall, or else the state could be forced by the Obama administration to join the federal exchange for at least a year. In response to the troubled rollout of the state's online health marketplace, Gov. Patrick and his team developed a dual-track strategy to try for a second time to build a state-based exchange with an off-the-shelf software product made by Virginia-based hCentive.

CGI has not been paid since November, but had already received $17 million on its contract for services provided. The funding to pay the CGI contract is being taken from the pot of $174 million in federal grants Massachusetts received to develop its new web-based health exchange under the Affordable Care Act. With the additional $35 million going to CGI, officials said the state will have spent about $100 million of the total grants.

“When we announced our decision to part ways with CGI in the middle of March we made clear our top priority was negotiating a careful, thoughtful transition so as not to jeopardize the project’s future and set us further behind,” Cohen said. “The focus has been and still is open enrollment in 2014 and a successful launch of that for the residents of Massachusetts.”

About $20 million of the additional payments approved to CGI will cover the costs of milestones met by the company since November, including key software systems that helped Connector officials process the backlog of paper applications for health insurance and the health plan eligibility determination system that CGI has worked with Optum to improve over the past several months.

The remaining $15 million is for operations and maintenance support needed to “keep the lights on” over the past several months, as well as the ongoing transfer of documents and information to the new vendor that will only be paid if the state is satisfied with the work, officials said.

Shor said that the Connector Authority and administration are still working to finalize a contract with Optum, which will impact the initial $121 million cost estimate for the dual-track strategy of building a new website with hCentive software or joining the federal exchange.

While the administration has identified about $40 million in federal grants it plans to repurpose, the state will have to make its formal request for additional funding to the Centers for Medicare and Medicaid Services in July when it presents on the progress being made toward a new website. Shor said officials are continuing to review the remaining $70 million in unspent grant money to see how much more can be used for the new project.